China minister warns on subsidies as Uber, Didi battle

China's Minister of Transport Yang Chuantang speaks at a news conference on March 14, 2016.
China's Minister of Transport Yang Chuantang speaks at a news conference on March 14, 2016. PHOTO: REUTERS

BEIJING (AFP) - China's transport minister warned online taxi-hailing companies on Monday (Mar 14) over subsidies leading to "unfair" competition, as US giant Uber and homegrown rival Didi spend billions in their battle for market share.

Yang Chuantang did not name either firm and did not threaten specific sanctions, but Chinese authorities have issued huge fines in competition probes in the past, and his comments represent a warning shot to the upstart industry.

Ride-booking services, which connect customers directly with drivers through smartphones, have threatened the old-style taxi sector - which often generates income for local authorities - and contributed to protests by cab drivers in China.

Both firms raised billions from investors last year as they try to secure their positions in the fiercely competitive market, offering both drivers and passengers subsidies that have proved a boon to Chinese consumers.

"The subsidies provided by some companies are a short-term move to grab market shares and posed unfair competition to the traditional taxi industry in a certain period of time," Transport Minister Yang Chuantang said at a briefing.

"In the long run, (they) will harm the healthy and sustainable development of the market," he said on the sidelines of the National People's Congress, the Communist-controlled parliament.

Uber's controversial boss Travis Kalanick has said Didi is spending as much as US$4 billion (S$5.5 billion) a year on subsidies, which the Chinese firm - backed by Internet giants Alibaba and Tencent - dismissed as "wildly creative", without giving specifics.

He was reported last month as saying his own firm was losing US$1 billion a year in China. An Uber spokeswoman declined to say by how much it was subsidising users in the country, where it is active in 22 cities.

The transport ministry in October unveiled proposed regulations that analysts said could be a "devastating blow" to the online ride-booking industry in China.

The draft bars private cars from participating in such services, which Chinese media reports said would force vehicles and drivers to be registered with the government.

It also requires ride-booking companies to obtain permits from local transport and telecommunications authorities in order to conduct business, with foreign companies having to set up servers in China and meet requirements for "national security".

The period for public comments ended in November but Yang said Monday authorities were still "revising and adjusting" the details, without giving a timetable for their introduction, although he acknowledged that car-hailing services were "welcomed by some passengers".